iBooyah Value Stocks
As most would agree, picking the right stock is no science. The goal of “buying low and selling high” is relatively a simple concept, but in practice this is not always easy to do. Instead, most of us end up buying high and hoping to sell it at a higher price. From our experience, attempting to profit from an already hot issue usually result in failure. For this reason, we tend to stay away from the so call hot stocks as we believed the market is just too efficient. Information in this day and age is instant and prices are reflected within seconds of any news. Once a stock has been anointed “hot”, it is usually too late. With that said, we have identified some "cold" stocks, which we believed has the potential to get hot and yield above average return.
Dell Inc. (DELL). We realized Dell face many challenges ahead, but at $23 per share we believed it is a buy. Most of the negatives have already been priced into this stock. As a result, the chances of it going lower are minimal. Michael Dell returning as the CEO is a positive move. To get back on track, we believed DELL will need to cut cost to better align the cost structure with projected revenue. We foresee an announcement such as reduction in force and management change very soon. If Dell falls further, we believed there’s a good chance it will get acquired, either by private equity firm or by one of its competitors. Either way, at this level, we believed it is a buy.
Motorola (MOT). Based on our analysis of Motorola fundamentals, our conclusion is this stock is trading below its intrinsic value. The fact Mr. Icahn is interested in MOT makes the issue more exciting. Trading at $19 per share, we believed this stock has the potential to go much higher. Despite their recent earning disappointment, we believed MOT will prevail in the long run. In our view, the sell-off following the last earnings report was over done. The stock has already recovered and could move past $20 in the next few months. Don’t be surprise if MOT announces plans to buy back their stocks with Mr. Icahn in the picture.
Oracle (ORCL). Oracle is on the comeback trail. In recent years, ORCL has been on a buying spree. As a result of this buying spree, the company has become diversified in its product offerings. While the majority of their earnings still come from their Database license, the other businesses are helping to add to the bottom line. The problem with Oracle was it was just a database company. Not anymore.
We also like the fact that business applications yields high margin and Oracle stands to benefit. Trading at around $17 per share, we believed ORCL is undervalued. Don’t expect ORCL to double in the next 6 months, but if ORCL recent earning is any indication of its future growth, we see this stock at $25 by December 2007.
Pfizer (PFE). Pfizer has had some recent setback with certain drug not getting approved. However, we like the fact that PFE is taking the necessary steps to get back on track. Recently, PFE has been working on its cost structure; reducing staff where appropriate. At $26 per share, PFE is a true value stock. Given ample time, we see PFE above $30 per share.
Dr. Horton (DHI), one of the biggest homebuilder in America is our favorite from this sector. While new home sales are still soft, we believed the worse is behind these homebuilders. Trading sub $30 per share, we believed there are still value in this stock. Our estimate is this stock should be in the mid 30s in about 6 months. Moreover, any of the homebuilders such as Toll Brothers (TOL), Lennar (LEN) and KB Homes (KBH) are also still undervalued. We believed this sector is going higher in 2007. As far as we are concerned, the so call ‘soft landing’ has been achieved. Thanks in part to the Feds decision keep short term interest rate at 5.25%.
Haliburton (HAL). Whether you support or are against the Iraq War, Haliburton is probably one of the most hated companies because politicians and media have somehow linked HAL to the failures in Iraq. Crazy is that sound, it is what it is. Politics aside, HAL trading below $30 per share is a great value. We have watched this stock for awhile now and the support level is $28 per share.
Don’t believed what you hear about alternative energy too much. In our view, alternative energy is still a distant dream. It’s great to see our country talking about this subject as it gives us hope, but the reality is oil and energy services companies like HAL is still in huge demand as oil price remains high.
As you might have already noticed, these stocks are being bashed left and right by the media and Wall St. This bashing is typical of broken stocks, which makes them our value picks. Investors can bash them all they want, but we have done our homework; these stocks are undervalued at their current level. In our humble opinion, anytime the reward outweighs the overall risk, one should consider buying.
Comments
I doubt DELL could be taken over by any of its competitors. HPQ is not in any position, in terms of balance sheet, to make such an acquisition. I do agree that the PC upgrade cycle has not been priced into DELL at this point.
Posted by: Jack Dale | March 4, 2007 05:13 PM